Rick Haglund: Auto industry recovery might not be good news for Michigan

The U.S. auto industry could be on the verge of a surprisingly strong recovery. But that might not be entirely good news for Michigan.

General Motors Co. and Ford Motor Co. are profitable again. Chrysler Group LLC came close to returning to the black in the first three months of this year and is predicting it will at least break even for the full year on an operating basis.

Many suppliers that survived a bloody 2009 also are seeing a healthy uptick in their business.

And in the most bullish sales forecast issued to date, consulting firm A.T. Kearney Inc. is forecasting that U.S. sales will return to the booming levels of the early 2000s in just two years.

Daniel Cheng, an A.T. Kearney partner, said Tuesday the firm's "baseline" forecast is for U.S. sales to jump from 11.7 million cars and trucks this year to 16.1 million in 2012.

He expects sales to spike because of an improving economy and a high level of pent-up demand, courtesy of the Great Recession.

A.T. Kearney's "optimistic" forecast is for sales of 16.8 million vehicles, a level not seen since 2005. Its "pessimistic" forecast calls for sales of 12.9 million cars and trucks.

Don't get me wrong. Any improvement in the performance of Michigan's largest industry must be welcomed.

The collapse of the SUV boom at the end of the 1990s sent the Detroit Three reeling and plunged Michigan into a "lost decade."

AP PhotosBut the Center for Automotive Research in Ann Arbor predicts that 176,500 auto jobs will be added in the United States over the next two years as vehicle production jumps by nearly a third in the same period.

Although the center hasn't produced a Michigan auto jobs forecast yet, the state is sure to benefit from a growing U.S. industry.

But too often, a recovery in the auto sector results in the state taking its foot off the economic diversification pedal. We can't afford to let up again.

For one thing, it's not a sure bet that the auto industry will perform according to the increasingly rosy forecasts being issued by industry prognosticators.

"We do believe the worst is over, but there is considerable uncertainty going forward," Chen said.

Oil prices, interest rates and the availability of credit are among the factors that will affect auto sales over the next several years.

And while the Detroit Three automakers appear to be on the mend, they'll likely continue to lose ground to tough foreign competitors, which, by the way, do not have any assembly plants in Michigan.

The Center for Automotive Research predicts that the Detroit Three's share of the U.S. vehicle market will fall to 40 percent in 2011, down from 41.8 percent last year.

Just 3 percent of Michigan's workers are employed in auto and parts manufacturing, down from 7 percent in 2000, according to Comerica Bank chief economist Dana Johnson.

But the state's economy remains surprisingly dependent on the auto industry.

Nearly 1.2 million jobs in the state--about one in every five jobs--are in some way tied to auto manufacturing and retailing, according to the Center for Automotive Research.

But last year's bankruptcies of GM and Chrysler provided a terrifying example of what can happen when a state has too many of its economic eggs in one basket.

More than ever, Michigan must nurture new sources of jobs that can counterbalance the wild gyrations of the auto industry.